Olson Company Has Three Departments Olson Company Is Considering Eliminating Dept

Essay

Olson Company has three departments.Data for the most recent year is presented below:
$\begin{array}{llll}&\text { Dept. } C&\text { Dept. } A&\text { Dept. } T\\\text { Sales } & \$ 4,000 & \$ 1,920 & \$ 2,240 \\\text { Variable expenses } & 3,280 & 1,420 & 520 \\\text { Unavoidable fixed expenses } & 480 & 180 & 440 \\\text { Avoidable fixed expenses } & \underline{555} & \underline{265} & \underline{360} \\\text { Operating income (loss) } & \$(315) & \$ 55 & \$ 920\end{array}$
Olson Company is considering eliminating Dept.C because it is operating at a loss.
Required:
A) Compute the change in operating income if Olson Company eliminates Dept. C and does not replace it.
B) Compute the change in operating income if Olson Company eliminates Dept. C and doubles the sales of Dept. T without increasing fixed costs.